JGBs slip in line with stocks, US Treasuries; 20-year sale eyed

Wed Jan 22, 2014 10:47pm EST

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TOKYO, Jan 23 (IFR) - Japanese government bond prices ended the morning session slightly lower on Thursday, as investors positioned for a sale of 20-year bonds, and also in line with stronger Tokyo stocks and weaker U.S. Treasuries overnight.

While dealers traded the current 10-year, 20-year and 30-year JGBs relatively actively to adjust their positions, most domestic real money accounts stayed on the sidelines ahead of Thursday's monthly 1.2 trillion yen ($11.5 billion) 20-year JGB auction.

As previously announced, the Ministry of Finance reopened the current 20-year JGB - the No. 147 issue with a coupon of 1.600 percent - for the regular settlement. Judging from the special repo rate for the current 20-year JGBs (plus 5 basis points at present), dealers have not sold the current 20s short in large lots to buy them back in this session's sale.

The new 20-year bonds traded with a yield of 1.547 percent in late morning trading on a when-issued basis, compared with 1.545 percent for the current 20-year JGBs, which rose half a basis point from Wednesday in cash trading.

Domestic life insurers and large pension funds are the main buyers of 20-year JGBs. The average life of liabilities at domestic life insurers is around 15 years.

At midday, the yield on the current five-year JGBs rose 1 basis point to 0.220 percent, while the 10-year yield was up 0.5 basis point at 0.680 percent. The 30-year yield rose 1 basis point to 1.710 percent.

Lead March JGB futures moved in a 144.04-144.13 range before finishing midday down 0.08 point at 144.07.

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